Senate Bill 118 – Summary: HOA Records, Penalties and Amendments

Here is the next installment of a summary of Utah HOA Legislation.  The following is a general overview of Senate Bill 118.   This is general information only, please contact me if you have specific questions.

SENATE BILL 118

COMMUNITY ASSOCIATION

AND

CONDOMINIUM ACT AMENDMENTS

  • Records
  • AmendmentsTitles 57-8-17 and 57-8a-225 require:
  1. Associations must keep and make documents available for copying or inspection by members/their agents.
  2. What documents? The documents are described in Title 16-6a-1601, 1602, 1603, 1605, 1606, 1610 of the Non-profit Act – AND – whatever other documents are described in your Declaration, Articles, Bylaws or Rules fall under this law as well.

Please – still explain what documents are subject to inspection/copying!

1.  Minutes of all meetings of members and Board

2.  Records of all actions taken by the member or Board without a meeting;

3.  Records of all actions taken by a committee of the Board on behalf of the Association;

4.  Records of all waivers of notices of meetings of members and of the Board.

5.  Appropriate accounting records;

6.  Member list – names and addresses, in alphabetical order, showing number of votes;

7.  Articles of Incorporation;

8.  Bylaws;

9.  Resolutions;

10.  Written communications to members general;

11.  List of names or business/home addresses of Board and officers;

12.  All financial statements for last three years (kept in the regular course by the Association)

Are there any other records we must produce?

First, please remember that the documents listed previously are outlined in the Non-Profit Corporations Act (Title 16-6a-1601 et seq.).

Important: This new bills does not add new records. The previously listed records are already part of the Non-Profit Corporations Act.

BUT —–

We’ve just gone over the list of records required to be kept. See 16-6a-1601.

  1. Some of these records must be kept as “permanent” records; others must be kept for a certain period of time. Talk to your attorney.
  2. However, 16-6a-1602(2) states that a member is entitled to inspect and copy any of the OTHER RECORDS of the nonprofit corporation.
  3. Other Records” are basically anything that the Association has in “its files.” This can be interpreted very broadly – electronic files or file cabinets, even storage sheds (receipts, cancelled checks, etc.). RECORDS REQUESTS ARE LEGITMATE – BUT A PAIN IN THE @#$.
  4. Talk to your attorney about scope of records you must provide to an Owner.
  5. The above just identifies “records” the next slide discusses the statutory changes.

Now that I know more about which records can be inspected, what are the new rules?

The following is premised on the requested record being one required to be produced:

  1. The Association may redact (a) social security numbers; (b) bank account numbers; or (c) any communication that is attorney-client privileged.

THIS IMPLIES THAT OWNERS CAN REQUEST A COPY OF VIOLATION LETTERS SENT TO OTHER OWNERS – THE JUSTIFICATION IS TO MAKE SURE THEY ARE NOT BEING “SINGLED OUT” BY AN ENFORCEMENT ACTION.

  1. An owner’s request can be to (a) personally inspect records; (b) copy records themselves (you must provide adequate place, lighting, etc., if they bring their own equipment for copying); (c) require the Association to make the copies (10 cents per page; $15/hour); or (d) request that a duplicating service make copies for which the requesting owner bears the cost.

What if the Association does not comply with the request?

  1. First, remember that you will have to determine if the request is proper. This discussion assumes the request is appropriate but that is an analysis in and of itself.
  2. Second, if the Association fails to comply with a proper request, the Association shall pay (a) reasonable costs of inspecting and copying the requested documents (copy charges, etc.); and (b) reasonable attorney fees and costs incurred in obtaining the inspection and copies.
  3. #2 above both expressly and implicitly presume that, ultimately, the owner obtained the requested records. In that case, if an attorney was hired to help obtain appropriate records, then the Association has some financial exposure.

Are there other penalties? Can we be sued?

  1. If an owner simply cannot obtain records, then the owner must give at least 10 days written notice evidencing their prior requests and stating how the request(s) have not been fulfilled.
  2. If the Association still does not produce records after this 10 day notice, then an owner is empowered to sue the Association requesting an order compelling the Association to produce the records, for $500 or actual damages, whichever is greater and attorney fees.
  3. A hearing on motion regarding records inspection shall be held within 30 days after filing the motion.
  4. REMEMBER – AN ASSOCIATION AVOIDS THESE CONSEQUENCES IF IT PRODUCES RECORDS TIMELY AND PROPERLY.
  5. REMEMBER – YOU CANNOT DRAFT YOUR GOVERNING DOCUMENTS AROUND THE REQUIREMENTS OF THIS STATUTE.

6, HINT: HAVE A DOCUMENT RETENTION POLICY – MAKE SURE IT COMPLIES WITH STATUTE, HOWEVER.

NOTE: You are going to see attorneys taking advantage of this statute to an Association’s detriment (see #2 above).

 

 

  Amending Governing Documents (Still Senate Bill 118)

Applicable to both Titles 57-8-39 (Condominiums) and 57-8a-104.

  1. Clarifies that AFTER DECLARANT CONTROL HAS ENDED (see your governing documents); governing documents may not require for amendments:

(a) the vote of more than 67% of the voting interests in the Association;

(b) cannot require the approval of any specific unit owner; OR

(c) the vote or approval of lien holders holding more than 67% of the first position security interests secured by a mortgage or trust deed.

(clarifies that all of this applies regardless of when the Association was created.)

  1. Finally, any provision in the governing documents that prohibits a vote or approval to amend any part of the governing documents during a particular time period is invalid.

Final Part to SB 118 – Penalties for failing to hold open board meeting.

  1. Please remember, that any time legislation is drafted, compromises are required to get legislators to either soften their position or agree with proposed bills.
  2. Open board meetings have been a concern for years with several legislators. Some people are convinced that Boards are doing things in “secret” and this bill (HB 99 and its penalties) comes from that concern.
  3. HB 99 will be discussed in another section, but Board meetings now have a mechanism whereby owners are allowed to attend and have minimal participation.
  4. SB 118 adds a penalty for Associations that do not comply with the open Board meeting requirements of HB 99.

HB 99 sets forth new rules for Board meetings – discussed in a separate section.

HB 99 also and fortunately, clarifies when executive session may be held (without members present)

SB 118 addressed a legislator’s concern that HB 99 did not have any “teeth” if it was violated….

In short, if open Board meetings are not held pursuant to HB 99, then:

  1. Owners must give the Association 90 days written notice of their demand that the Board follow the new open Board meeting law.
  2. The complaining owner must express what part of the law was, in their opinion, violated.
  3. Only if the Association does not comply with this written demand of noncompliance can the owner file a lawsuit to compel that the Association follow the law.
  4. The Association is subject to damages ($500 or more) and attorney fees if the Association is ordered to follow the new open Board meeting laws.

THAT IS ALL FOLKS (for this one) !!!!

2 thoughts on “Senate Bill 118 – Summary: HOA Records, Penalties and Amendments

  1. Thank you John, when is the next Rock concert ?

    Harold Cell # 801.372.5718 Land line # 801-756-2129 Challenge. Innovate. Deliver.

    Like

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